February 05, 2018

How Much You Should Have Saved by Your 40s

Among U.S. households headed by someone aged 44 to 49, the average retirement savings balance is $81,347, according to the Economic Policy Institute. But while that number may not seem all that bad, it's also a bit misleading. A small number of wealthier people who are financially able to set aside very large amounts can easily pull an average up. And in fact, they do. If we take a look at the median retirement savings balance -- signifying that half of these households have more saved, and half have less -- it's just $6,200. And what this tells us is that there are far more 40-something families whose nest eggs are below the average than above it.

Yikes! The median is $6,200???? That is totally pathetic!

But there's more -- they continue:

But even if you're between 44 and 49 and have managed to amass $81,000 or so, you still have some catching up to do. According to Fidelity, by the time you reach your mid-40s, your retirement savings balance should be equal to four times your salary. Since the average salary for American workers in their mid-40s is somewhere around the $50,000 range, to have accumulated just $81,347 at this point means you're not where you need to be. And if you're among the countless Americans who have yet to set aside a single dime for retirement, let this serve as a wake-up call.

In other words, you should have $200k saved by your mid-40's.

IMO this is not anywhere close to being enough (at 4% withdrawal, you can take $8k out per year). I'd prefer at least double that by mid-40s for sure -- hopefully even by the time you reach 40. That would allow $16k per year withdrawal at retirement. Add in savings from 40 to retirement age plus Social Security and you should have more than enough to retire -- and do so early!

Also, most people in GenX and Millenials will get massive inheritances from the Boomers and Greatest Generation...especially with stock & housing prices at nosebleed levels. So I really don't think it is as bad as it seems.

Interesting read, and a bit depressing as well, especially if you haven't saved what the post suggests you should. But, no use crying over spilt milk. Better to start now if you're already behind or haven't started yet.